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Jake Van Der Kamp

'The proposals to be included in the final report of the Health and Medical Development Advisory Committee will ask workers to contribute about 3 per cent of their monthly income to a medical savings account, plus an additional 1 per cent for mandatory medical insurance.'
SCMP, September 28
Where to begin on the failings and shortcomings of this proposal? There are just too many angles but let's start with some obvious number comparisons.
The average cost of medical care in countries of the  Organisation for Economic Co-operation and Development (a rich nations' club) is about 9 per cent of  GDP with about a quarter of the members showing this cost ratio at  more than 10 per cent. Ask your friend Google if you don't believe me.
The highest figure I could find is for the United States, which is expected to spend about US$2.2 trillion or 16.2 per cent of GDP on medical care this year.
In all cases, these costs are rising in both absolute terms and as a percentage of GDP, both because of greater demand for medical care and because the costs of individual elements of medical care are rising faster than consumer price indices.
Bear in mind that these figures are percentages of GDP whereas the 4 per cent (3 and 1) we are now talking of in Hong Kong represents a percentage of wages and salaries, which comes to a good deal less than GDP. I can't give you an exact figure but call it a half to two-thirds.
In other words, our proposed scheme would cover proportionately only about  25 per cent of the medical costs that we could expect when comparing ourselves to a group of countries that are on average about as wealthy as Hong Kong.
So, how different are we from these other countries? Are Hong Kong people much healthier? Do Hong Kong's doctors charge much less per patient?
I don't have the answers. I am not a medical expert. My interest lies with costs and how best they are billed. But I very much doubt that the differences are all that great when all costs are taken into account.  I am sure that Hong Kong costs will  gravitate to OECD levels.
Thus, don't fool yourself that dunning 4 per cent from wages and salaries will put our health services on a self-paying basis. The figure would have to be much greater than this. The public purse will still have to carry the bulk of the cost.
And the split of that 4 per cent is also odd. The plan calls for 3 per cent to go to a medical savings account, which would be very akin to a provident fund. When you get a medical bill, you would charge it to your medical account.
The difficulty with this is that medical expenditure is not like retirement budgets. There is nothing as regular and steady about  it as a food budget. You may find yourself paying nothing for years and then suddenly suffer a major medical problem and find that the money in your medical account is in no way sufficient to cover the costs you incur. That's why most medical plans are insurance plans, not provident funds. Yet our proposal is to feature HK$3 of provident fund for every HK$1 of medical insurance. It should be the other way around. In fact, it is probably best done as all insurance.
We seem to have this cockamamie scheme because it was a brainwave of someone in the Bauhinia Foundation, the chief executive's think-tank, and general bureaucratic sycophancy is therefore enough to make government departments take it seriously.
But will the Bauhinia Foundation please tell us what authority it claims for its supposed expertise in medical plans? I am willing to admit that I am not a medical expert. I claim only some working expertise in finance as authority for saying this scheme is all wrong in its basic financing elements.
Bear in mind that 4 per cent of wage or salary is in actuality a much bigger figure than it seems.  Ask yourself how much of your pay packet you have left over after tax, rent or mortgage payments, and regular costs of food, clothing, transportation and other essentials that you cannot avoid or cut.
If your real disposable income after all this is 20 per cent of your stated wage or salary, you are doing well. Now look at that 4 per cent again. It's actually four  out of 20. It also comes after a 5 per cent hit for your mandatory provident fund. You are now looking at a nine  out of 20 hit. This is a big sting.
And do you know what the bureaucrats will do with this money?  They will turn it over to fund managers who will take the easy option and stick it into boring old stocks like HSBC or Hutchison and then charge you enormous annual fees for this slight service.
We are talking of savings that you could have kept and used to start your own business or otherwise invested in ways that could give you a higher return than you will ever get from a fund manager who treats you as a captive.
We are also talking of a Hong Kong government that is running an embarrassingly huge fiscal surplus and has a Midas-sized treasure hoard of fiscal savings. That's where we really need to look for the funding of a medical scheme.



Ludicrous medical scheme just a big sting